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Journal Article
Lessons Learned from Small Business Lending During COVID-19: A Case Study of the California Rebuilding Fund
As the COVID-19 pandemic forced California businesses to shut down in March 2020, the fate of small businesses, which often had fewer reserves to draw upon when trying to survive the shutdowns, became particularly concerning. Federal aid measures, including the Paycheck Protection Program (PPP), brought relief to many business owners, but their deployment also confirmed what many small business advocates feared: business owners in the most vulnerable communities and underrepresented business owners often struggled to obtain assistance. At the same time, small business lending capital dried ...
Report
Allocation and Employment Effect of the Paycheck Protection Program
The Paycheck Protection Program (PPP) was a large and unprecedented small-business support program enacted as a response to the COVID-19 crisis in the United States. The PPP administered almost $800 billion in loans and grants to small businesses through the banking system. However, there is still limited consensus on its overall effect on employment. This paper explores why it is challenging to estimate the effect of the PPP. To do so, we first focus on the timing of the allocation of PPP funds across regions and firms. Counties less affected by COVID-19 and with a larger presence of ...
Journal Article
Hires and Separations During the COVID-19 Crisis by Firm Size
The negative effects of the COVID-19 crisis were larger for firms with under 50 employees, even with loans from the Paycheck Protection Program.
Journal Article
Was the Paycheck Protection Program Effective?
The Paycheck Protection Program offered timely COVID-19 relief, but a new study found that most of its funds failed to reach the workers it was meant to help.
Discussion Paper
Who Received PPP Loans by Fintech Lenders?
Small businesses not only account for 47 percent of U.S employment but also provide a pathway to success for minorities and women. During the coronavirus pandemic, these small businesses—especially those owned by minorities—were hard hit as consumers reduced spending disproportionately on services that require in-person physical interaction, such as hotels and restaurants. In response, the U.S. government launched the Paycheck Protection Program (PPP) to provide guaranteed and potentially forgivable small business loans. In this post, we examine financial technology (fintech) lenders ...
Journal Article
How Well Did PPP Loans Reach Low- and Moderate-Income Communities?
We investigate the degree to which Paycheck Protection Program (PPP) loans reached small businesses in low- and moderate-income (LMI) communities. We use PPP loan data from the Small Business Administration that we geocode and link to census tracts. We assess the program’s reach in a few ways and focus on the number of loans, rather than the amount of funds, that went to different areas in order to capture the program’s impact on businesses with fewer than 50 employees—the vast majority of small businesses. We find evidence that the program did have a broad reach within LMI communities, ...
Journal Article
Fiscal Relief during the COVID-19 Pandemic
In response to the sharp economic downturn during the COVID-19 pandemic, Congress passed unprecedented policy relief measures to support households, businesses, and the broader economy. Compared with previous fiscal stimulus responses, these relief programs have been unmatched in size and scope, speed of response, and novelty of design.Huixin Bi and Chaitri Gulati review recent empirical research on three fiscal relief programs—stimulus checks, augmented unemployment insurance (UI) benefits, and the Paycheck Protection Program (PPP)—to understand their effects on the broader economy as ...
Working Paper
Optimal Allocation of Relief Funds: The Case of the Paycheck Protection Program
The Paycheck Protection Program (PPP) was a large and unprecedented small-business support program that allocated $800 billion in loans and grants to small businesses following the onset of the COVID-19 crisis. This paper explores the optimal allocation of funds across firms and the distortions caused by allocating these funds through banks. We show that it can be optimal to allocate funds to the least or most affected firms depending on the underlying distribution of the shock that firms face, the firms’ financial position, and the total budget available for the program. In the model, as ...
Discussion Paper
Who Benefited from PPP Loans by Fintech Lenders?
In the previous post, we discussed inequalities in access to credit from the Paycheck Protection Program (PPP), showing that, although fintech lenders had a small share of total PPP loan volumes, they provided important support for underserved borrowers. In this post, we ask whether smaller firms received the amount of PPP credit that they requested, and whether loans went to the hardest-hit areas and mitigated job losses. Our results indicate that fintech providers were a key channel in reaching minority-owned firms, the smallest of small businesses, and borrowers most affected by the ...
Journal Article
The Great Resignation and the Paycheck Protection Program
A prominent feature of the US labor markets during the recovery from the COVID-19 recession was a high level of worker separations in the form of quits. This phenomenon, sometimes referred to as the Great Resignation, cannot be fully explained by the strength of the recovery. We show that firms that employ fewer than 250 individuals played a disproportionately larger role in generating excess quits during this episode. We further argue that the availability of Paycheck Protection Program funds might have prevented some “usual” reallocation from happening early on and thus subsequently ...